Press release -
Low borrowing costs for the municipal sector
Kommuninvest’s quarterly report "Local Government Debt Management" offers a picture of the structure and conditions of the funding of the total debt of the municipal sector. Today, an updated data set for the second quarter 2021 is presented.
The report is built on Kommuninvest's lending and the information that municipalities, municipal companies and regions have registered in the debt management tool KI Finans. The data set for the second quarter includes 6 616 loans, certificates and bonds with a total value of SEK 508 billion as well as 1 697 derivative linked to underlying loans totaling SEK 183 billion.
New transactions in the second quarter 2021
The average interest rate, including derivatives, for new transactions in the municipal sector was from the first to the second quarter 2021 reduced by 6 basis points to 0.23 percent. This means that the interest rate trend turned downwards again after a rise at the beginning of the year.
The average maturity of new transactions in the second quarter was 2.81 years. The figure for the first quarter was 2.52 years. The average period of fixed interest, including derivatives, was shortened from 2.68 years in the first quarter to 2.18 years in the second quarter.
Total debt
The average interest rate, including derivatives, of the total debt of the municipal sector decreased from the first to the second quarter 2021 by 1 basis point to 0.93 percent. This is the lowest level registered so far in a time series started in 2015. The average interest rate excluding derivatives, on the contrary, increased by 1 basis point to 0.51 percent.
The average maturity of the total debt was reduced from 2.88 years in the first quarter to 2.82 years in the second quarter. The average period of fixed interest, including derivatives, for the total debt was at the samt time reduced from 2.94 to 2.84 years. The use of derivatives extended the period from 1.61 to 2.84 years.
– The interest rates paid by the municipal have reached very low levels. For the total debt, including derivatives, this is the lowest figure that we have seen in this reporting format. This in itself is beneficial. But it is also a situation that could change quite quickly. Given that maturities and periods of fixed interest continue to be short, and for the total debt even have been shortened, an interest rate increase in the market would have rapid effects in the loan portfolio of the municipal sector, says Emelie Värja, Head of Research at Kommuninvest.
Local Government Debt Management Q2 2021
For further information
Emelie Värja, Head of Research, tel: +46 73 078 06 35, e-mail: emelie.varja@kommuninvest.se
David Ljung, Head of Communications, tel: +46 73 068 45 45, e-mail: david.ljung@kommuninvest.se
Topics
Kommuninvest is a municipal cooperation for efficient and sustainable financing of housing, infrastructure, schools, hospitals etc. Together we get better loan terms than each one individually. Since the start in 1986, the Kommuninvest collaboration has helped reduce the local government sector’s borrowing costs by many billion SEK. Currently, 293 municipalities and regions are members of this voluntary cooperation. With a balance sheet total of approx. SEK 550 billion (USD ~63 billion), Kommuninvest is the largest lender to the local government sector and one of the ten largest credit institutions in Sweden. The head office is located in Örebro.
